Divisionalization: Difference between revisions
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Companies organize as | ==Divisionalization== | ||
Companies who organize as divisions can do so along: | |||
* Geographical regions | * Geographical regions | ||
* Product lines | * Product lines | ||
Why | ===Why?=== | ||
* Delegation and control closer to the product | * Delegation and control closer to the product | ||
* Motivation | * Motivation | ||
* Quicker decisions | * Quicker decisions | ||
* | * Take account of regional issues | ||
* Exploit managerial expertise | * Exploit managerial expertise | ||
* | * Divisions may be in competition | ||
* Top | * Top management loses control | ||
* Risk avoidance - because no | * Risk avoidance - because no diversified portfolio at division level | ||
* Increased costs - duplication, lack of scale | * Increased costs - duplication, lack of scale. | ||
Prerequisites | ===Prerequisites=== | ||
* Alignment and Integration | * Alignment and Integration | ||
* Are | * Are divisions similar or diverse | ||
* | * Some functions could be centralized and others at Div level | ||
Broken down into | Broken down into | ||
* | * Cost Centers- Providing services to other divisions - focus keeop costs down | ||
* Investment Center - provides services - maximise ROI | * Investment Center - provides services - maximise ROI | ||
* Profit Center - focus on selling | * Profit Center - focus on selling | ||
[[Category:Finance]] | [[Category:Finance]] | ||
Revision as of 08:49, 9 February 2011
Divisionalization
Companies who organize as divisions can do so along:
- Geographical regions
- Product lines
Why?
- Delegation and control closer to the product
- Motivation
- Quicker decisions
- Take account of regional issues
- Exploit managerial expertise
- Divisions may be in competition
- Top management loses control
- Risk avoidance - because no diversified portfolio at division level
- Increased costs - duplication, lack of scale.
Prerequisites
- Alignment and Integration
- Are divisions similar or diverse
- Some functions could be centralized and others at Div level
Broken down into
- Cost Centers- Providing services to other divisions - focus keeop costs down
- Investment Center - provides services - maximise ROI
- Profit Center - focus on selling
